No company is without its challenges. In moments of distress, however, the need for serious change can be vital. This is where a turnaround plan can be pivotal. It’s a process of renewal – one that not only identifies key underlying issues within the company but actively implements change at the deepest levels in order to restore health to an organization.
Making decisions that involve change can vary depending on the types of difficulties a company is facing. The turnaround plan should start with the goal of maximizing the value of a company for all stakeholders while transforming it from an underperforming company to a performing company. There are numerous ways to accomplish this which include doing an out-of-court workout, acting as the chief restructuring officer, being a court-appointed receiver, and/or filing for bankruptcy. No matter what option you choose to accomplish your plan, every plan contains these four core steps:
1. Identify the underlying issues affecting the company
- Assemble a team of advisors/advocates for the company. This may include a financial advisor, a CPA, a debtor rights counsel, an appraiser, and/or customers.
- Assess the Situation. This includes leadership, finance, operations, sales, and marketing. Talk to key stakeholders. Implement a rolling 13-week cash flow model to provide further insights into the company’s financials.
- Communicate findings with leadership and stakeholders so they can understand, commit, and support the discoveries.
2. Develop a clear, realistic plan that creditors will support
- Identify ways to raise cash. Options include A/R collections; new sales; vendor payment plans; expense reductions; reduced inventory – sell and don’t replenish; ownership cash infusion; and sale/leaseback of property.
- Evaluate the company’s lending situation and options such as a forbearance agreement; over formula on the line of credit; and other financing.
- Stabilize the company – utilize customer communication and relationships; key employee retention plans; maintain employee relationships; communicate with the bank; leadership changes (if appropriate); operational issues addressed – safety, equipment, process improvements, etc.; and financial issues addressed – current financials, inventory costing, etc.
- Considerations – take into consideration the long-term stress the company has been under; customer frustration; vendor frustration; that COD/Prepays are most likely in place; and an over recognition of the environment in which the company is operating.
3. Validate the plan by ensuring buy-in from stakeholders
- Stakeholders – revisit who key stakeholders are; present the plan to stakeholders and explain how they will benefit; articulate what the company needs from stakeholders and determine what stakeholders need from the company.
- Communication – develop a communication rhythm that may include a weekly call with the bank, a weekly review of cash flow, daily/weekly check-in with the leadership team, daily/weekly call with key customers to discuss quality, delivery, and/or funding needs as applicable or daily/weekly call with key vendors.
4. Execute the plan with a sense of urgency
- Assign responsibility and accountability with due dates
- Conduct daily/weekly meetings with leadership on plan status
- Weekly review of rolling 13-week cash flow to drive decisions and actions
- Measure progress and make adjustments as needed
All companies experience performance challenges at some point. If your business finds itself facing some immense challenges, just know that you’re not alone. We work with clients who have questions about what this all means for them, what options and conditions for support or exemptions apply, what implications are for team members, how to mitigate business value erosion, how to manage communications with banks/creditors/vendors/customers, etc. All that to say, we’ve seen businesses make successful turnarounds when they choose to implement a plan.
At DWH, we’re here for you. Feel free to reach out for a conversation on how we can be of assistance as you focus on thriving and not just surviving.
All companies experience change.
Plan for it with us.